A recent amendment to the regulation on providing sovereign guarantees now allows the government to provide loan guarantees to local councils.
The regulation was introduced in 2017 to allow the government to provide sovereign guarantees in a transparent and cost-effective manner that takes into account the state of the national economy, the government’s financial situation, and developmental priorities. It previously stated that the government can only give out sovereign loan guarantees to state-owned companies and their subsidiaries as well as registered companies.
However, the recent amendment allows the government to provide sovereign loan guarantees to local councils and independent government agencies. The government is not allowed to provide loan guarantees to individuals. The government is only allowed to give guarantees for loans that do not exceed an effective interest rate of 3.5% after leaving out the variable interest. However, the state has the authority to ignore this rule after evaluating the initiative being funded with the loan, the state of the economy, and the current market rate for loans.
The state is allowed to provide sovereign loan guarantees for tourism-related projects, social housing other development projects, as well as financial transactions authorised by the Ministry of Finance. So far, the state has provided sovereign guarantees to the Housing Development Corporation Limited (HDC), State Trading Organisation (STO), Fahi Dhiriulhun Corporation Limited, Bank of Maldives (BML), and the Maldives Airports Company Limited (MACL).